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General Steel Domestic Sales, LLC v. Chumley

United States District Court, D. Colorado

August 11, 2014

GENERAL STEEL DOMESTIC SALES, LLC, d/b/a GENERAL STEEL CORPORATION, a Colorado limited liability company, Plaintiff,
v.
ETHAN DANIEL CHUMLEY, individually, ATLANTIC BUILDING SYSTEMS, LLC, a Delaware corporation, doing business as ARMSTRONG STEEL CORPORATION, PRQ INTERNET KOMMANDITBOLAG (LIMITED PARTNERSHIP) doing business as PRQ INET KB, and GOTTFRID SWARTHOLM, individually, Defendants.

RECOMMENDATION OF UNITED STATES MAGISTRATE JUDGE

KATHLEEN M. TAFOYA, Magistrate Judge.

This case comes before the court on "Plaintiff's Motion for Default Judgment Against Defendants PRQ and Swartholm" [Doc. No. 108] ("Mot.") filed November 18, 2013. "Defendants Ethan Chumley's and Atlantic Building Systems, LLC's Response to Motion for Default Judgment Against Defendants PRQ and Swartholm" ("Chumley Resp.") [Doc. No. 129] was filed on December 12, 2013, and Plaintiff filed its Reply on December 30, 2013 [Doc. No. 140]. Defendants PRQ Internet Kommanditbolag (Limited Partnership) doing business as PRQ INET KB, ("PRQ") and Gottfrid Swartholm, individually, did not file a response.

This case was filed on March 25, 2013, alleging federal jurisdiction pursuant to the Lanham Act, Title 15 U.S.C. § 1125, et seq. Both PRQ and Swartholm were personally served on April 4, 2013, at the Marifred Prison outside Stockholm, Sweden with the Summons and Complaint in this action, but have failed to respond within the ninety days allotted by the Federal Rules of Civil Procedure. [Doc. No. 50-1, Ex. A.] The Clerk entered Default against PRQ and Swartholm on July 11, 2013 [Clerk's Entry of Default; Doc. No. 51]. Neither PRQ nor Swartholm responded to the entry of default.

Default judgment may be entered against a party who fails to appear or otherwise defend. Fed.R.Civ.P. 55. A defendant who fails to answer, plead, or otherwise properly defend an action is deemed to have admitted the factual allegations of the complaint as true. Brill Gloria Hausund Gartengeräte GmbH v. Sunlawn, Inc., Case No. 08-cv-00211-MSK-MEH, 2009 WL 416467, *2 (D. Colo. Feb. 18, 2009.) In addition, the court accepts the undisputed facts set forth in the affidavits and exhibits. Id .; Deery American Corp. v. Artco Equipment Sales, Inc., Case No. 06-cv-01684-EWN-CBS, 2007 WL 437762, at *3 (D. Colo. Feb. 6, 2007). Even after entry of default, however, it remains for the court to consider whether the unchallenged facts constitute a legitimate basis for the entry of a judgment. Procom Supply, LLC v. Langner, Case No. 12-cv-00391-MSK-KMT, 2012 WL 4856724, *2 (D. Colo. Oct. 11, 2012); See McCabe v. Campos, Case No. 05-cv-00846-RPM-BNB, 2008 WL 576245, at *2 (D. Colo. Feb. 28, 2008.)

A default is not treated as a confession of liability, and, by failing to respond, a defendant does not concede the plaintiff's legal conclusions. Bixler v. Foster, 596 F.3d 751, 762 (10th Cir. 2010); Procom Supply at *3-4. A trial court is vested with broad discretion in deciding whether to enter a default judgment. Grandbouche v. Clancy, 825 F.2d 1463, 1468 (10th Cir. 1987).

ANALYSIS

There is only one claim for relief asserted in the Amended Complaint against Defendants PRQ and Swartholm, for False Advertising in violation of Title 15 U.S.C. § 1125(a)(1)(B) (First Claim for Relief). [Doc. No. 101, Am. Compl. at ¶¶ 46-55.] To sustain its claim of false advertising under 15 U.S.C. § 1125(a)(1)(B), Plaintiff must establish that: (1) Defendants (including PRQ and Swartholm along with Chumley and Armstrong Steel) made a false or misleading description of fact or representation of fact in a commercial advertisement about their services; (2) the misrepresentation is material, in that it is likely to influence a consumer's purchasing decision; (3) the misrepresentation actually deceives or has the tendency to deceive a substantial segment of its audience; (4) Defendants placed the false or misleading statement in interstate commerce; and (5) Plaintiff has been or is likely to be injured because of Defendants' misrepresentation. Berken v. Jude, Case No. 12-cv-02555-RPM, 2013 WL 6152347, at *2 (D. Colo. Nov. 22, 2013) (referencing Zoller Labs., LLC v. NBTY, Inc., 111 F.Appx. 978, 982 (10th Cir. 2004) (quoting Scott Co. v. United Indus. Corp., 315 F.3d 264, 272 (4th Cir. 2002) (collecting cases)).

Plaintiff presents the same factual proof as to each of the five elements of the claim with respect to all Defendants, notwithstanding that PRQ and Swartholm, owners of the offending website on which the alleged false advertising appears, are positioned differently than Chumley and Armstrong Steel, alleged creators and posters of the false advertising on the offending website. Plaintiff does, however, now request different remedies applicable to the two sub-groups. Plaintiff's complaint states

53. As a direct and proximate result [of the false advertising], General Steel has been injured and sustained damages as identified herein in amounts to be proven at trial.
54. Plaintiff also seeks trebling of said damages and disgorgement of Defendants' profits.
55. General Steel is also entitled to temporary and/or final injunctions to prevent or restrain further violations.

(Am. Compl., ¶¶ 52-54.)

In spite of the Amended Complaint's request for monetary damages against all four defendants, Plaintiff now asserts that it seeks only injunctive relief against Defendants PRQ and Swartholm in the form of entry of a permanent injunction and an order transferring ownership of the domain www.steelbuildingcomplaints.com to Plaintiff. (Mot. at 9.)

Whether or not default judgment is entered against Defendants PRQ and Swartholm, the false advertising claim will remain applicable to the two non-defaulting defendants, Chumley and Armstrong Steel. Plaintiff has not abandoned its claim for monetary damages and injunctive relief as to those defendants. As a result, Chumley and Armstrong Steel argue that Plaintiff's ...


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